What do the G fund and Rodney Dangerfield have in common?

Senior Correspondent Mike Causey is taking a sick day today. This Federal Report column originally ran on March 1.

The late, great comedian Rodney Dangerfield always complained that he didn’t get any respect. The line was nearly always part of his routine. And it worked every time. You knew it was coming and laughed when it did.

But if Dangerfield had been an expert on the federal Thrift Savings Plan, or a TSP investor, he might have slapped the no-respect label on the TSP’s bond fund, the F fund. It’s one of the two least popular traditional funds in the federal 401(k) plan, where most people put most of their retirement nest egg in the super-safe (also super-dull) Treasury securities G fund.

Arthur Stein, a D.C.-area financial planner who has many TSP clients, said it’s a fact, “The F fund gets no respect, but it should.”

Stein’s client base includes a couple of feds who have more than $1 million in their TSP accounts. And they did it the hard way, not by transferring money into the TSP, but by regular, steady, long-term investing.

In addition to the C, S and I stock funds, he says that the TSP has two bond funds. One may get too much attention, the other not enough:

The G fund, which invests solely in government securities and never fluctuates in value.

The F fund, which invests in government, corporate and mortgage-backed bonds and does fluctuate in value as interest rates increase and decrease.

The F fund was usually the top performer (as of Dec. 31, 2016).

Looking at Average Annual Rates of return, the F fund outperformed the G fund over the last one, three, five and 10 years.

Over the last 20 calendar years, the F fund outperformed the G fund 75 percent of the time (15 out of 20 years).

So where do feds put most of their money? The G fund, not the F fund, Stein said.

Investment Allocations Compared to Investment Returns

Fund

Percent of Dollars Invested

10-year Average Annual Rates of Return

G-fund

36 percent

3 percent

F-fund

5 percent

5 percent

Stein says that federal TSP participants “invested seven times as much in the G fund as the F fund despite the F fund’s historical record of outperforming three out of every four years.” Question: Why? And what should people be doing? We spoke about the pros and cons of investing in the various funds, and the fact that too many people may have too much of their nest egg in the G fund. and other TSP topics on a recent Your Turn radio show.